Dividend investing is popular again. Investors have taken to heart Jeremy Siegel's studies showing that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.
One particular area that has garnered interest over the years is master limited partnerships. Investors are drawn to MLPs for their high yields and tax deferment. MLPs don't pay taxes at the corporate level, so the tax burden then gets passed to the investor. Without getting into too much detail, because of the structure of the partnerships and the distributions, investors are entitled to a serious tax deferral. Investors should fully understand what they are in for before buying MLPs, but for those willing to do the research, it can be very profitable.
The highest yields can be very tantalizing. As long as a stock yielding 15% doesn't lose value, you'll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.
However, certain types of companies, such as MLPs, have to pay out most of their cash flow as distributions, so their yields will be higher than "normal." Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend, or your investment could be disastrous.
I ran a screen for the highest-yielding MLPs. The only limitation I've set is that the MLPs must have a market cap greater than $1 billion.
Here are the top 25 highest-yielding MLPs the screen produced:
|
Company |
Market Cap (millions) |
Yield | |
|---|---|---|---|
|
1 |
Cheniere Energy Partners, L.P. (NYSE: CQP) |
$2,530 |
10.7% |
|
2 |
Inergy, L.P. (Nasdaq: NRGY) |
$3,377 |
10.1% |
|
3 |
BreitBurn Energy Partners L.P. (Nasdaq: BBEP) |
$1,092 |
9.1% |
|
4 |
Ferrellgas Partners, L.P. (NYSE: FGP) |
$1,715 |
8.9% |
|
5 |
Boardwalk Pipeline Partners, LP (NYSE: BWP) |
$4,985 |
8.5% |
|
6 |
Energy Transfer Partners, L.P. (NYSE: ETP) |
$9,410 |
8.0% |
|
7 |
Terra Nitrogen Co., L.P. (NYSE: TNH) |
$3,427 |
7.9% |
|
8 |
Legacy Reserves LP (Nasdaq: LGCY) |
$1,203 |
7.8% |
|
9 |
PAA Natural Gas Storage, L.P. (NYSE: PNG) |
$1,287 |
7.7% |
|
10 |
Penn Virginia Resource Partners, L.P. (NYSE: PVR) |
$1,837 |
7.6% |
|
11 |
Natural Resource Partners LP (NYSE: NRP) |
$3,062 |
7.6% |
|
12 |
Enbridge Energy Partners, L.P. (NYSE: EEP) |
$7,288 |
7.6% |
|
13 |
NuStar Energy L.P. (NYSE: NS) |
$3,825 |
7.5% |
|
14 |
Crestwood Midstream Partners LP (NYSE: CMLP) |
$1,005 |
7.4% |
|
15 |
Linn Energy, LLC (Nasdaq: LINE) |
$6,699 |
7.3% |
|
16 |
Suburban Propane Partners, L.P. (NYSE: SPH) |
$1,681 |
7.2% |
|
17 |
Copano Energy, L.L.C. (Nasdaq: CPNO) |
$2,147 |
7.2% |
|
18 |
TC Pipelines, LP (Nasdaq: TCLP) |
$2,331 |
7.2% |
|
19 |
Eagle Rock Energy Partners, L.P. (Nasdaq: EROC) |
$1,335 |
7.2% |
|
20 |
Genesis Energy, L.P. (NYSE: GEL) |
$1,781 |
7.0% |
|
21 |
Holly Energy Partners, L.P. (NYSE: HEP) |
$1,119 |
6.9% |
|
22 |
AmeriGas Partners, L.P. (NYSE: APU) |
$2,473 |
6.9% |
|
23 |
CVR Partners, LP (NYSE: UAN) |
$1,776 |
6.7% |
|
24 |
Targa Resources Partners LP (Nasdaq: NGLS) |
$2,907 |
6.7% |
|
25 |
Kinder Morgan Energy Partners LP (NYSE: KMP) |
$23,132 |
6.6% |
Source: NAPTP; Capital IQ, a division of Standard & Poor's.
These MLPs are a good place to start your research, but they're not formal recommendations. Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket -- no matter how tempting the yields are.
For a basket of high-yield dividend opportunities, click here to get The Motley Fool's five-page free report "13 High-Yielding Stocks to Buy Today."
